(Bloomberg) --
Economic activity grew at a “modest pace overall” from April
to mid-May, an improvement from the “slight-to-moderate pace”
in the prior period, according to the central bank’s Beige Book
economic survey released Wednesday in Washington two weeks ahead
of policy makers' next meeting.
The report is a generally positive -- though not uniformly so --
signal ahead of crucial data Friday on employment in May. A
recent string of weak reports on retail sales, factory orders
and home purchases have indicated growth is slowing as President
Donald Trump's trade war with China weighs on businesses.
The Beige Book, based on anecdotal information collected by the
12 regional Fed banks through May 24, will factor into
discussions among Fed officials. Policy makers have signaled
they're open to cutting interest rates if escalating trade
tensions dim the U.S. economic outlook amid muted inflation.
So far they've stopped short of flagging a move when they next
meet June 18-19 in Washington, even as investors expect three
quarter-point rate cuts in the next year. Investors have
increased bets the Fed will ease after Trump threatened Mexico
last week with additional tariffs unless it curbs the flow of
migrants into the U.S.
Nearly all districts reported some growth, indicating they're
handling the headwinds to the economy well, including the
tariffs and a lack of available workers. At the same time, there
are indications of weakness, with some regions citing the
uncertainty caused by tariffs, a slowdown in manufacturing, and
struggles in agriculture.
Most districts saw modest or moderate growth in jobs and wages,
though regions including Richmond and San Francisco cited
difficulties finding workers or highlighted tight conditions.
Overall wage pressures remained “relatively subdued” with some
employers boosting benefits.
Restaurants Closed
In one example of labor pressures highlighted in the report,
several restaurants in Charleston, South Carolina, closed
because they were so short-staffed. One business moved to
counter service and switched to disposable utensils to stay
open.
The Fed said prices increased at a modest pace in most districts
-- in line with recent muted inflation readings. At the same
time, firms noted that input prices were rising at a faster pace
than final goods costs, and several regions highlighted higher
freight prices.
Trade and tariffs were mentioned in several regions including
Philadelphia, which cited uncertainty as delaying business
investment. Dallas also said trade uncertainty was weighing on
business sentiment.
Some of that may be affecting manufacturing. Richmond, for
example, said factory shipments and new orders declined. The
picture for commodity inputs was varied across the nation, with
some sources spotting lower steel prices while others said costs
remained elevated.
Across the U.S., farms reported struggles. In the Minneapolis
district, a wet spring threatens the planting season, with some
growers saying they might not be able to plant at all this year.
In Kansas City, farm income and credit conditions for producers
weakened. Anecdotes from Chicago echoed these troubles, with
farmers challenged by poor weather and low crop prices.
Other messages on the economy were mixed earlier Wednesday. U.S.
service industries expanded at the best pace since February,
according to an Institute for Supply Management survey, while
the ADP Research Institute said companies added the fewest
workers to payrolls since 2010.
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